Are you bullish on St. Jude Medical, Inc. (NYSE:STJ)?
In the eyes of many investors, hedge funds are perceived as overrated, old financial vehicles of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open currently, Insider Monkey aim at the top tier of this group, about 525 funds. It is widely held that this group has its hands on most of the smart money's total capital, and by watching their highest quality stock picks, we've deciphered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 33 percentage points in 11 months (find the details here).
Equally as crucial, positive insider trading activity is a second way to look at the investments you're interested in. Obviously, there are a variety of motivations for an upper level exec to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).
Keeping this in mind, let's analyze the newest info for St. Jude Medical, Inc. (NYSE:STJ).
In preparation for the third quarter, a total of 23 of the hedge funds we track were long in this stock, a change of -15% from the previous quarter. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings considerably.
According to our 13F database, Ariel Investments, managed by John W. Rogers, holds the biggest position in St. Jude Medical, Inc. (NYSE:STJ). Ariel Investments has a $81.9 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which held a $28.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds that are bullish include James E. Flynn's Deerfield Management, Phill Gross and Robert Atchinson's Adage Capital Management and Jim Simons's Renaissance Technologies.
Because St. Jude Medical, Inc. (NYSE:STJ) has faced declining interest from upper-tier hedge fund managers, logic holds that there is a sect of hedgies that slashed their positions entirely heading into Q2. It's worth mentioning that Glenn Russell Dubin's Highbridge Capital Management cut the biggest investment of all the hedgies we track, valued at close to $21.6 million in call options., and James E. Flynn of Deerfield Management was right behind this move, as the fund dumped about $20.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q2.
Insider buying made by high-level executives is particularly usable when the company we're looking at has seen transactions within the past half-year. Over the latest 180-day time period, St. Jude Medical, Inc. (NYSE:STJ) has experienced zero unique insiders buying, and 10 insider sales (see the details of insider trades here).
We'll also examine the relationship between both of these indicators in other stocks similar to St. Jude Medical, Inc. (NYSE:STJ). These stocks are Varian Medical Systems, Inc. (NYSE:VAR), Edwards Lifesciences Corp (NYSE:EW), Zimmer Holdings, Inc. (NYSE:ZMH), Smith & Nephew plc (ADR) (NYSE:SNN), and Boston Scientific Corporation (NYSE:BSX). All of these stocks are in the medical appliances & equipment industry and their market caps are closest to STJ's market cap.